- The Washington Times - Friday, January 20, 2006

ASSOCIATED PRESS

Oil prices zoomed to a four-and-a-half month high above $68 a barrel yesterday, rallying on supply fears tied to Iran’s tense diplomatic standoff with the West over its nuclear ambitions.

Labor unrest in oil-rich Nigeria and new threats from al Qaeda contributed to traders’ jitters at a time when global petroleum demand is high and the emergency supply cushion is thin, leaving little room in the event of an output disruption.

Analysts said speculative buying by hedge funds and commodity funds also buoyed crude futures, which settled at their highest level since Sept. 1, just days after Hurricane Katrina made landfall.

The Gulf of Mexico’s offshore petroleum industry is far from recovering from Hurricanes Katrina and Rita, and at least one-sixth of the region’s normal daily oil production will still be off line at the start of the next storm season, a federal agency says.

Katrina and Rita destroyed 115 of the Gulf’s 4,000 production platforms and damaged another 52, according to a report released Thursday by the Minerals Management Service, which manages federal offshore leases.

Hurricane season begins June 1.

The fear of new supply disruptions outweighs the knowledge that crude-oil inventory levels are at multiyear highs and that winter temperatures in the United States have been above normal, keeping demand for home-heating fuels low.

“The market is just gripped with anxiety about Iran,” said oil broker Andrew Lebow of Man Financial in New York. “It’s also concerned about Nigeria, where we actually have lost barrels. And we’ve also lost export barrels from Russia because of cold weather in Siberia that is driving up demand.”

That said, Mr. Lebow added that the market is “completely decoupled” from the fundamentals of supply and demand.

On Thursday, energy traders brushed off a U.S. government report that showed rising domestic inventories of oil and gasoline and sent crude futures to their highest close in four months.

Light sweet crude for February delivery rose $1.52 to settle at $68.35 on the New York Mercantile Exchange.

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